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UTC to buy Red Hawk

FARMINGTON, Conn.--UTC Fire & Security, a business unit of United Technologies, announced Sept. 5 an agreement to buy systems integrator Red Hawk Industries, based in Colorado in a deal worth more than $100 million. It is likely Red Hawk will be integrated with UTC's Chubb Security business, which is strong in Europe and Canada, and recently opened an office in Chicago.
Red Hawk, which had made 16 acquisitions since its inception in 1999, was one of the fastest growing security integrators in the market, focusing largely on the financial sector and already established as the second-biggest player in that sector, behind only Diebold.
However, said John Mack III, chief executive officer of USBX Advisory Services, which represented Red Hawk in this transaction, Red Hawk's private equity firm, Florida Capital Partners, invested "about five years ago, and it's not unusual for firms about five years in to start looking at their exit opportunities." Combined with a reasonably good mergers and acquisitions market in which to sell, that "was the basis for us to go out and check the market," Mack said, and it became "clear somebody was ready to pay a fair and reasonable price."
Although exact details of the deal were not released, Mack and UTC both indicated the purchase price was slightly less than Red Hawk's 2005 revenues of $142 million. Also, Greg Johnson, president of Red Hawk, and his executive staff will all remain with the company, something Mack said positively affected the purchase price, along with Red Hawk's strong free cash flow and good percentage of revenues coming from service contracts.
"Around one times revenue is around the higher end of the range for integrators," Mack said of the deal. "It was a fair price for UTC, as they have good prospects for growth in the U.S. market, and it represents a good investment for them. For the sellers it was a good valuation that reflects that it's a premium property."
For more on this deal from Red Hawk and UTC, see the November issue of Security Systems News.